Children's apps are in plentiful supply, but ads and in-app purchases within them are coming under increased scrutiny

Premium-rate telephone watchdog PhonepayPlus has fined an Australian company £250k for a 'misleading' app promising to boost smartphone battery life, which was advertised within other developers' children's apps.

CommandM PTY Limited's app signed people up to a £4.50-a-week premium-rate subscription, but the fact that it was advertised within children's apps including ABC Match and Raspberry Torte's Fresh Fashions Boutique led to complaints from parents.

PhonepayPlus says that one parent received a charge of more than £100 on their mobile bill after their child signed up to the subscription service.

The regulator's ruling entitles parents to a refund if their children were misled into signing up for the subscription. PhonepayPlus is also contacting developers of the apps within which the ad was carried, to inform them of its decision.

"As children and young people increasingly engage with apps we will continue to work with parents and games developers to make sure that children can get the best of this exciting technology in a safe environment," said chief executive Paul Whiteing.

The ruling comes amid growing unease over the way advertising and in-app purchases are being used within some children's apps, and a spate of reports of children spending hundreds or even thousands of pounds on virtual items without their parents' knowledge.

CommandM's battery-life app was different, though, because it used premium-rate billing to charge for its subscription – thus bringing it within PhonepayPlus's area of regulation, unlike in-app purchases made through Apple and Google's App Stores for iOS and Android.

The UK's Office of Fair Trading is carrying out an investigation into the wider area of "potentially misleading or commercially aggressive practices" in children's apps and online games, and expects to publish its next steps by October 2013.

The contest, run by a company called Yamoja, required users to sign up to a £4-a-week subscription service for ringtones, wallpapers and games. Outfit7 swiftly pulled the advertisement after it was reported.

Children's app developers whose apps include advertising rarely know what ads will be served before they run: they leave that to their mobile advertising network partners.

This is why inappropriate ads can appear without the developer's prior knowledge: a previous Outfit7 app, Talking Ginger, infamously included an ad for £400 cash loans from payday lender Wonga, before those too were pulled.

The company has since said it is working hard to prevent this from happening again. "We believe we should be an example. We have a huge user base among kids, and we can't afford to take that lightly," chief executive Samo Login told The Guardian in June.